美國證券交易委員會
華盛頓特區 20549
表單
截至季度期
從_____到_____的過渡期
委員會檔案編號。
(註冊人在其章程中的確切名稱)
| (公司註冊或組織的州或其他司法管轄區) | (美國國稅局僱主識別號) | ||
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(主要執行辦公室地址) |
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| 發行人的電話號碼： |
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| (註冊者的電話號碼，包括區號) | |||
根據該法第12(b)條註冊的證券：
| 每個類別的標題 | 交易標的 | 註冊的每個交易所的名稱 |
| 無 | 無 | 不適用 |
請通過勾選標記指明註冊人是否在過去12個月內（或註冊人要求提交此類報告的較短期間）根據《1934年證券交易法》第13條或第15（d）條提交了所有必需的報告，並且在過去90天內是否一直受到此類提交要求的限制。
請通過勾選表明註冊人是否在過去12個月內（或註冊人被要求提交此類文件的較短期間內）電子提交了根據規則405的 S-t條例（本章第232.405節）要求提交的每個交互數據文件。
請勾選註冊者是否爲大型加速報告人、加速報告人、非加速報告人、小型報告公司或新興增長公司。請參閱交易法第120億.2條中對「大型加速報告人」、「加速報告人」、「小型報告公司」和「新興增長公司」的定義。（選擇一項）
| 大型快速登記人 ☐ | 快速登記人 ☐ |
| 較小報告公司 | |
| 成長型企業 |
如果是初創成長型公司，請勾選如公司是否選擇不使用遵守根據證券交易所規則第13(a)條所提供的任何新的或修訂的財務會計準則的延長過渡期。 ☐
請用勾選標記指示註冊方是否爲殼公司（如《交易所法》規則120億.2所定義）是 ☐
否
僅適用於企業發行者：請指明截至最新可行日期，註冊人的各類普通股的流通股數：
2024年12月6日
普通投票股票：
天賜國際公司
關於表格10-Q的季度報告
截至2024年10月31日的財政季度
目錄
| 第一部分。財務信息 | 頁碼。 | |
| 項目1. | 基本報表（未經審計）: | 3 |
| 簡明資產負債表 - 截至2024年10月31日（未經審計）和2024年7月31日 | 3 | |
| 合併經營報表（未經審計） - 截至2024年和2023年10月31日的三個月 | 4 | |
| 簡明股東權益變動表（未經審計） - 截至2024年和2023年10月31日的三個月 | 5 | |
| 現金流量表（未經審計） - 截至2024年和2023年10月31日的三個月 | 6 | |
| 合併財務報表附註（未經審計） | 7 | |
| 項目2. | 管理層對控制項和經營結果的討論與分析 | 22 |
| 項目3。 | 關於市場風險的定量和定性披露 | 27 |
| 項目4。 | 控制和程序 | 27 |
| 第二部分其他信息 | ||
| 項目1. | 法律訴訟 | 29 |
| 項目1A。 | Risk Factors | 29 |
| 項目2. | 未註冊的股票證券銷售及收益使用 | 29 |
| 項目3。 | 高級證券的缺省 | 29 |
| 項目4。 | 礦業安全披露 | 29 |
| 第五項。 | 其他信息 | 29 |
| 第六項。 | 展覽品 | 29 |
| 簽名 | 30 | |
| 2 |
PART I – FINANCIAL INFORMATION
| Item 1. | Financial Statements |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN UNITED STATES DOLLARS)
| October 31, | July 31, | |||||||
| 2024 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expense | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | ||||||||
| Other assets: | ||||||||
| Lease security deposit | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Income taxes payable | $ | $ | ||||||
| Due to related parties | ||||||||
| Accrued liabilities and other payables | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Series A Preferred stock, $ par value; shares authorized; shares issued and outstanding as of October 31, 2024 and July 31, 2024 | ||||||||
| Series B Preferred stock, $ par value; shares authorized; shares issued and outstanding as of October 31, 2024 and July 31, 2024 | ||||||||
| Undesignated preferred stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding as of October 31, 2024 and July 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity attributable to TIANCI INTERNATIONAL, INC. | ||||||||
| Non-controlling interest | ||||||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| 3 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN UNITED STATES DOLLARS)
| For the three months ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| OPERATING REVENUES | ||||||||
| Global logistics services | $ | $ | ||||||
| Other revenue | ||||||||
| Total Operating Revenues | ||||||||
| COST OF REVENUES | ||||||||
| Global logistics services | ||||||||
| Other revenue | ||||||||
| Total Cost of Revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ||||||
| Other income net | ||||||||
| Income (loss) before provision for income taxes | ( | ) | ||||||
| Provision for income taxes | ||||||||
| Net (loss) | ( | ) | ( | ) | ||||
| Less: net income attributable to non-controlling interest | ||||||||
| Net (loss) attributable to TIANCI INTERNATIONAL, INC. | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares* | ||||||||
| Basic and diluted | ||||||||
| (Loss) per common share attributable to TIANCI INTERNATIONAL, INC.* | ||||||||
| Basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of preferred shares A* | ||||||||
| Basic and diluted | ||||||||
| (Loss) per preferred share A attributable to TIANCI INTERNATIONAL, INC.* | ||||||||
| Basic and diluted | $ | $ | ) | |||||
| Weighted average number of preferred shares B* | ||||||||
| Basic and diluted | ||||||||
| (Loss) per preferred share B attributable to TIANCI INTERNATIONAL, INC.* | ||||||||
| Basic and diluted | $ | ) | $ | |||||
| * |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| 4 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 31, 2024 AND 2023
(EXPRESSED IN UNITED STATES DOLLARS)
| Series A Preferred Stock | Series A Preferred Stock amount* | Series B Preferred Stock | Series B Preferred Stock amount* | Common stock* | Common stock amount* | Subscription receivable* | Additional Paid-in Capital | (Accumulated Deficit) | Noncontrolling interest | Total | ||||||||||||||||||||||||||||||||||
| Balance at July 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance at October 31, 2024 (unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series A Preferred Stock amount* | Common stock* | Common stock amount* | Subscription receivable* | Additional Paid-in Capital | (Accumulated Deficit) | Noncontrolling interest | Total | ||||||||||||||||||||||||||||
| Balance at July 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at October 31, 2023 (unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) |
*Shares are presented on a retroactive basis to reflect the reorganization on March 3, 2023.
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| 5 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
| For the three months ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Amortization of operating lease right-of-use asset | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expense | ||||||||
| Lease security deposit | ( | ) | ||||||
| Due from related party | ( | ) | ||||||
| Advances from customers | ( | ) | ||||||
| Accounts payable | ||||||||
| Income taxes payable | ||||||||
| Operating lease liabilities | ( | ) | ||||||
| Accrued liabilities and other payables | ||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Deferred offering costs incurred | ( | ) | ||||||
| Net cash (used in) financing activities | ( | ) | ||||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash, beginning | ||||||||
| Cash, ending | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-Cash Activities: | ||||||||
| Early termination of right-of-use assets and lease liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| 6 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
NOTE 1 – NATURE OF BUSINESS AND ORGANIZATION
On June 13, 2012, Freedom Petroleum Inc. was incorporated under the laws of the State of Nevada. In May 2015, Freedom Petroleum changed its name to Steampunk Wizards, Inc.; and on November 9, 2016, Steampunk Wizards changed its name to Tianci International, Inc. The Company is a holding company. As of July 31, 2024, the Company had one operating subsidiary, Roshing International Co., Limited (“Roshing”). The Company owns 90% of the capital stock of Roshing through RQS United, a wholly-owned subsidiary. The Company’s fiscal year end is July 31.
On February 13, 2023, the Company incorporated a wholly owned subsidiary, Tianci Group Holding Limited, in the Republic of Seychelles.
Reorganization
On March 3, 2023 the Company entered into
a Share Exchange Agreement with RQS United Group Limited (“RQS United”) and RQS Capital Limited (“RQS Capital”),
which was the sole shareholder of RQS United (the “Exchange Agreement”). RQS United owns
As a result of the Share Exchange, RQS United became our wholly-owned subsidiary and the former RQS United stockholder became our controlling stockholder. The share exchange transaction was treated as a reverse acquisition, with RQS United as the acquirer and the Company as the acquired party for accounting purposes. Unless the context suggests otherwise, when we refer in this report to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of RQS United and its consolidated subsidiary, Roshing.
Prior to the Share Exchange, the Company was a shell company as defined in Rule 12b-2 under the Exchange Act. As a result of the transactions under the Exchange Agreement, the Company ceased to be a shell company.
RQS United is a holding company incorporated on November 4, 2022 in the Republic of Seychelles. RQS United has no substantive operations other than holding 90% of the outstanding share capital of its subsidiary, Roshing, which was incorporated on June 22, 2011 in Hong Kong, is principally engaged in global logistics services. Less than 4% of its revenue for the nine months ended July 31, 2024 was derived from other business lines: sales of electronic device hardware components, development of logistics software and websites, technical consulting, and software maintenance. Roshing’s business is primarily carried out in Hong Kong.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The interim financial information referred to above has been prepared and presented in U.S. dollars in conformity with accounting principles generally accepted in the United States applicable to interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The interim financial information has been prepared on a basis consistent with prior interim periods and years and includes all disclosures that are necessary and required by applicable laws and regulations. These interim financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading. This report on Form 10-Q should be read in conjunction with the Company’s financial statements for the years ended July 31, 2024 and 2023 and notes thereto included in the Company’s Form 10-K filed with the SEC on October 22, 2024.
| 7 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
Results of the three months ended October 31, 2024 are not necessarily indicative of the results that may be expected for the year ending July 31, 2025 or any other future periods.
Principles of consolidation
The consolidated financial statements include the financial statements of Tianci and its subsidiaries. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting periods. Actual results could differ from these good faith estimates and judgments.
Foreign currency translation and transactions
The Company uses the U.S. dollar as its reporting currency and functional currency. Transaction gains and losses are recognized in the consolidated statement of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use. The Company maintains its bank accounts in United States and Hong Kong.
Accounts receivable, net
Accounts receivable include trade accounts
due from customers which are generally collected within six months. In establishing the allowance for doubtful accounts, management considers
historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit history
and financial condition of the customer. Management reviews its receivables on a regular basis to determine if the allowance for doubtful
accounts is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against the allowance
for doubtful accounts after management has determined that the likelihood of collection is not probable. As of October 31, 2024 and July
31, 2024,
Fair Value Measurements
The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.
| 8 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
The accounting standard defines fair value, establishes as a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follow:
| · | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| · | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments. |
| · | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Financial instruments included in current assets and current liabilities (such as cash, accounts receivable, due from related party, accounts payable, and due to related parties) are reported in the consolidated balance sheets at cost, which approximates fair value because of the short period of time between the origination of such instruments and their expected realization.
Revenue recognition
The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606. This standard requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identifies the contract with the customer, (ii) identifies the performance obligations in the contract, (iii) determines the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocates the transaction price to the respective performance obligations in the contract, and (v) recognizes revenue when (or as) the Company satisfies the performance obligations.
The Company records revenue net of sales taxes which are subsequently remitted to governmental authorities and are excluded from the transaction price.
The Company’s revenue recognition policies are as follows:
a. Global Logistics Services
The Company provides global logistics services, including ocean freight forwarding and related logistics solutions. As a non-asset-based carrier, the Company does not own transportation assets.
The Company derives its revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by the customer via either container ships or general cargo vessels. The most significant drivers of changes in gross revenues and related transportation expenses are volume and weight.
In general, each shipment transaction or service order constitutes a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed upon transaction price exists. The transaction price, which is based on volume, weight, and shipping time, is fixed and not contingent upon the occurrence or non-occurrence of any other event.
The Company typically satisfies its performance obligations at a point in time when freight is shipped to destination port and accepted by its customers. The Company does not have significant variable consideration in its contracts. Taxes assessed concurrently with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenues.
| 9 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Revenue is recorded on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the services, when it assumes risk of loss, when it has discretion in setting the prices for the services to the customers, and when the Company has the ability to direct the use of the services provided by the third party. In most cases we act as an indirect carrier. When acting as an indirect carrier, we issue a Fixture Note to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, we receive a Master Ocean Bill of Lading.
The Company’s evaluation determined that it is in control of establishing the transaction price, managing all aspects of the shipment process and assumes the risk of loss for delivery, collection, and returns. Based on its evaluation of the control of services and risk involved, the Company determined that it acts as a principal rather than an agent in global logistics service arrangements and such revenues are reported on a gross basis.
b. Electronic Device Hardware Components Products Sales
The Company is a distributor of electronic device hardware components and generates revenue through resale of these components. The Company’s products include high performance computer chips, Wi-Fi modules, Bluetooth modules, 4G network modules, LED screens, and touch screens. In accordance with ASC 606, Revenue Recognition: Principal Agent Consideration, an entity is a principal if it controls the specified good or service before that good or service is transferred to a customer. Otherwise, the entity is an agent in the transaction. The Company evaluates three indicators of control in accordance with ASC 606: 1) For hardware sales, the Company is the most visible entity to customers and assumes fulfillment risk and risks related to the acceptability of products, including addressing customer complaints directly and handling of product returns or refunds directly; 2) The Company is exposed to inventory risk before transfer of control to customers; and 3) The Company determines the resale price of hardware products. After evaluating the above circumstances, the Company considers itself the principal of these arrangements and records hardware sales revenue on a gross basis.
Hardware sales contracts are on a fixed price basis with no separate sales rebate, discount, or other incentive. Revenue is recognized at a point in time when the Company has delivered products that have been accepted by its customer with no future obligations. The Company generally permits returns of products due to product failure; however, returns are historically insignificant.
c. Software and Website Development Services
The Company generates revenue by developing customized freight shipping and related logistic software and websites, which are generally on a fixed-priced basis. The software helps wholesalers, ecommerce retailers, and freight shipping providers to manage complex workflows and improve work efficiency. The Company generally has no enforceable right to payment for performance completed to date and is only entitled to payment after software is fully developed, delivered, tested, and accepted by the customer. As a result, revenues from software development contracts are recognized at a point in time when services are fully rendered, and written acceptances have been received from customers.
d. Technical Consulting and Training Services
The Company provides technical consulting and training services to help customers, generally its existing customers, to better understand and properly use its customized software and related hardware. Services are generally carried out on a per-time fixed rate basis. Revenue is recognized at a point in time when service is rendered and the customer confirms the completion of consulting or training.
| 10 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
e. Software Maintenance and Business Promotion Services
The Company provides software maintenance services to keep customers’ software up to date and assists customers in promoting business with ongoing marketing support. The Company charges a flat rate for a fixed duration on a subscription basis, generally 12 months. Revenue is recognized ratably each month over the contract period.
f. Business Consulting Services
The Company provides business consulting services to help customers apply for immigration and non-immigration visas. The Company is responsible for performing background checks, case analysis, and preparing related application paper works. The Company charges a flat fee for the visa application services. Revenue is recognized at a point in time when an application is submitted with proper authorities.
Cost of revenues
For global logistics services, cost of revenue consists primarily of cargo space charged by direct ocean carriers, freight forwarders and ancillary logistics services fees.
For hardware products sales, the cost of revenue consists primarily of the costs of hardware products sold.
For software, consulting, services-based revenue, the cost of revenue consists primarily of costs paid to outsourced service providers and compensation expenses paid the Company’s service vendor.
Advertising costs
Advertising costs amounted to $
Operating leases
Effective August 1, 2022, the Company adopted
FASB ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require the Company to reassess:
(1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and
(3) initial direct costs for any expired or existing leases. For lease terms of twelve months or less, a lessee is permitted to make an
accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows
lessees to treat the lease and non-lease components of a lease as a single lease component. Upon adoption of ASU 2016-02 effective August
1, 2022, the Company recognized a $
The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of the Company’s real estate leases are classified as operating leases.
| 11 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
Lease payments for an operating lease transitioning to ASC 842 using the effective date are based on future payments at the transition date and on the present value of lease payments over the remaining lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception; therefore, operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Lease expense is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.
The lease for the Company’s Hong Kong
office facility was early terminated in September 2023, which resulted in a derecognition of $
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted for items which are non-taxable or non-deductible. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited interim consolidated financial statements and the corresponding tax bases used in the computation of taxable income (loss). In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the statements of operations, except when it is related to items credited or charged directly to equity, in which case the deferred tax is dealt with in equity. Net deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the net deferred tax asset will not be realized.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax for uncertain tax positions are classified as income tax expenses in the period incurred.
During the year ended July 31, 2024, the Company
incurred an IRS penalty of $
The Hong Kong tax returns filed for 2019 and subsequent years are subject to examination by the applicable tax authorities.
The US tax returns filed for 2021 and subsequent years are subject to examination by the applicable tax authorities.
| 12 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
The Company computes earnings (loss) per share (“EPS”) in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the diluted effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of October 31, 2024 and July 31, 2024, there were dilutive shares outstanding related to the convertible Series B Preferred Stock. Each share of Series B and Series A Preferred Stock is and was convertible by the holder of the share into shares of common stock, subject to equitable adjustment of the conversion rate.
Noncontrolling Interests
The Company’s noncontrolling interest
represents the minority shareholder’s
Related parties
Parties, which can be a corporation, other business entity, or an individual, are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
Recently issued accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.
In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments — Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments — Credit Losses — Available-for-Sale Debt Securities. The amendments in this Update provide an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In November 2019, the FASB issued ASU No. 2019-10, which updates the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning August 1, 2023 as the Company is qualified as a smaller reporting company. The adoption of this standard on August 1, 2023 has not had and is not expected to have a material impact on the Company’s future consolidated financial statements.
| 13 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The adoption of this standard on August 1, 2022 did not have a material impact on the Company’s consolidated financial statements.
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated Financial Statements.
NOTE 3 – PUBLIC OFFERING AND DEFERRED OFFERING COSTS
On March 14, 2024, the Company executed an agreement with Prime
Number Capital LLC (“Prime”) for Prime to act as the Company’s Lead Underwriter on a “firm commitment”
basis in connection with a public offering of shares of the Company’s common stock.
As of October 31, 2024, deferred offering costs relating to the public offering consist of:
| Cash advance to Prime | $ | |||
| Attorney fees | ||||
| Accountant fees | ||||
| Total | $ | |||
Upon closing of the public offering, the deferred offering costs will be offset against the proceeds from the public offering and included as part of the total public offering stock issuance costs.
NOTE 4 – RELATED PARTIES BALANCES AND TRANSACTIONS
Due to related parties consists of:
| Transaction | October 31, | July 31, | ||||||||||
| Name | Relationship | Nature | 2024 | 2024 | ||||||||
| RQS Capital | 61.89% shareholder | Company cash collection due to RQS Capital | $ | $ | ||||||||
| TOTAL | $ | $ | ||||||||||
This liability is unsecured, non-interest bearing, and due on demand.
| 14 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
Employment agreements with officers and director retainer agreements
Tianci currently maintains two employment agreements and seven director retainer agreements with its officers and directors. The agreements have terms of 3 years and each provides for monthly compensation in amounts ranging from $1,300 per month to $3,800 per month.
For the three months ended October 31, 2024 and 2023, the Company incurred management compensation expenses of $ and $, respectively. These amounts are included in “general and administrative expenses” in the accompanying consolidated statements of operations.
NOTE 5 – STOCKHOLDERS EQUITY
On January 26, 2023 the Company filed
with the Nevada Secretary of State a Certificate of Amendment of Articles of Incorporation (the “Amendment”). The
Amendment amended Article 3 of the Company’s Articles of Incorporation to provide that the authorized capital stock of the
Company will be
The following table sets forth information, as of October 31, 2024, regarding the classes of capital stock that are authorized by the Articles of Incorporation of Tianci International, Inc.
| October 31, 2024 | ||||||||
| Class | Shares Authorized | Shares Outstanding | ||||||
| Common Stock, $.0001 par value | ||||||||
| Series A Preferred Stock, $.0001 par value | ||||||||
| Series B Preferred Stock, $.0001 par value | ||||||||
| Undesignated Preferred Stock, $.0001 par value | ||||||||
Series A Preferred Stock
Each share of Series A Preferred Stock was convertible by the holder of the share into 100 shares of common stock, subject to equitable adjustment of the conversion rate. Each holder of Series A Preferred Stock had voting rights equal to the holder of the number of shares of common stock into which the Series A Preferred Stock was convertible. Upon liquidation of the Company, each holder of Series A Preferred Stock was entitled to receive, out of the net assets of the Company, $0.01 per share, then to share in the distribution on an as-converted basis. On January 19, 2024, all shares of the Series A preferred Stock were converted into shares of Company common stock.
Series B Preferred Stock
Each share of Series B Preferred Stock may be converted by the holder of the share into 100 shares of common stock, subject to equitable adjustment of the conversion rate. Each holder of Series B Preferred Stock has voting rights equal to the holder of the number of shares of common stock into which the Series B Preferred Stock is convertible. Upon liquidation of the Company, each holder of Series B Preferred Stock is entitled to receive, out of the net assets of the Company, $0.01 per share, then to share in the distribution on an as-converted basis.
| 15 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
Undesignated Preferred Stock
The Board of Directors has the authority, without shareholder approval, to amend the Company’s Articles of Incorporation to divide the class of undesignated Preferred Stock into series, and to determine the relative rights and preferences of the shares of each series, including (i) voting power, (ii) the rate of dividend, (iii) the price at which, and the terms and conditions on which, the shares may be redeemed, (iv) the amount payable upon the shares in the event of liquidation, (v) any sinking fund provision for the redemption or purchase of the shares, and (vi) the terms and conditions on which the shares may be converted to shares of another series or class, if the shares of any series are issued with the privilege of conversion.
Issuances of Preferred Stock and Common Stock
On January 19, 2024 the Company sold an aggregate
of shares of its common stock to five present or former members of the Company’s Board of Directors for an aggregate
price of $
On January 19, 2024 the Company issued shares of its common stock to RQS Capital Limited. The shares were issued upon RQS Capital’s exercise of its right to convert shares of the Company’s Series A Preferred Stock into 8,000,000 shares of common stock.
On January 24, 2024 the Company sold an aggregate
of shares of its common stock to nine investors for an aggregate price of $
On April 24, 2024, the Company sold shares
of its Series B Preferred Stock to RQS Capital Limited for a cash payment of $
NOTE 6 – INCOME TAXES
Income Taxes
Seychelles
RQS United is incorporated in Seychelles and is not subject to tax on income generated outside of Seychelles under the current law. In addition, upon payment of dividends, no withholding tax is imposed under current law.
Hong Kong
Roshing is incorporated in Hong Kong and
is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance
with relevant Hong Kong tax laws.
| 16 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
For the three months ended October 31, 2024,
the loss before provision for income taxes of $
Significant components of the provision for income taxes are as follows:
| For the three months ended | ||||||||
October 31, 2024 | October 31, 2023 | |||||||
| Current Hong Kong | $ | $ | ||||||
| Deferred Hong Kong | ||||||||
| Provision for income taxes | $ | $ | ||||||
The following table reconciles the Hong Kong statutory rates to the Company’s Hong Kong effective tax rate:
| For the three months ended | ||||||||
October 31, 2024 | October 31, 2023 | |||||||
| Hong Kong statutory income tax rate | ||||||||
| Effective tax rate | ||||||||
For United States income tax purposes, Tianci
has a net operating loss carryforward of approximately $
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of October 31, 2024 and July 31, 2024, the Company did not have any significant unrecognized uncertain tax positions.
As of July 31, 2024, tax years 2021 and forward generally remain open for examination for United States Federal and State tax purposes and tax years 2019 and forward generally remain open for examination for Hong Kong tax purposes.
| 17 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
NOTE 7 — CONCENTRATION OF RISK
Credit risk
Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash held in banks. The cash balance in each financial institution
in the United States is insured by the FDIC up to $
Customer concentration risk
For the three months ended October 31, 2024,
two customers accounted for
For the three months ended October 31, 2023,
two customers accounted for
Vendor concentration risk
For the year ended July 31, 2024, three vendors
accounted for
NOTE 8— COMMITMENTS AND CONTINGENCIES
Lease commitments
On January 1, 2021, Roshing entered into an
operating lease agreement for office space in Hong Kong with a third party. The agreement had a term of two years and provided for monthly
rent of HKD
In September 2023, the Company entered into
a one-year office rental service agreement with a monthly lease payment of approximately $
Rent expenses were $
| 18 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
Contingencies
From time to time, the Company may be a party to legal proceedings, as well as certain asserted and un-asserted claims. The Company was not involved in any material legal proceedings nor asserted claims as of October 31, 2024.
NOTE 9 — ENTERPRISE-WIDE DISCLOSURE
The Company follows ASC 280, Segment Reporting, which requires companies to disclose segment data based on how management makes decisions about allocating resources to each segment and evaluates their performances. The Company’s chief operating decision-makers (i.e., the Company’s chief executive officer and his direct assistants, including the Company’s chief financial officer) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues, cost of revenues, and gross profit by business lines and by regions (Hong Kong, Vietnam, Japan and Singapore) for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by ASC 280, the Company considers itself to be operating within one reportable segment.
Disaggregated information of revenues by business lines are as follows:
| For the three months ended | ||||||||
| October 31, | ||||||||
| 2024 | 2023 | |||||||
| Electronic Device Hardware Components Sales | $ | $ | ||||||
| Software and Website Development Services | ||||||||
| Software Maintenance and Business Promotion Services | ||||||||
| Business Consulting Services | ||||||||
| Global Logistics Services | ||||||||
| Total revenues | $ | $ | ||||||
Disaggregated information of revenues by regions are as follows:
| For the three months ended | ||||||||
| October 31, | ||||||||
| 2024 | 2023 | |||||||
| Hong Kong | $ | $ | ||||||
| Vietnam | ||||||||
| Japan | ||||||||
| Singapore | ||||||||
| Total revenues | $ | $ | ||||||
| 19 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
NOTE 10 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Unaudited)
The Company performed a test on the restricted net assets of its consolidated subsidiaries in accordance with Rule 4-08(e)(3) of Regulation S-X promulgated by the SEC, “General Notes to Financial Statements” and concluded that it was applicable and the Company is required to disclose the required financial statement information for the parent company.
The subsidiaries did not pay any dividends to the parent during the periods presented. For the purpose of presenting parent only financial information, the Company records its investment in its subsidiaries under the equity method of accounting. Such investments are presented on the separate parent only balance sheets as “investment in subsidiaries” and the income (loss) of the subsidiaries is presented as “share of income (loss) of subsidiaries.” Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed or are not required.
PARENT COMPANY BALANCE SHEET
| October 31, | July 31, | |||||||
| 2024 | 2024 | |||||||
| ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expense | ||||||||
| Investment in subsidiaries | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Accounts payable and other accrued liabilities | ||||||||
| Payable to subsidiaries | ||||||||
| Due to related parties | ||||||||
| Total Liabilities | $ | $ | ||||||
| Stockholders’ Equity | ||||||||
| Series A Preferred stock, $ par value; shares authorized; shares issued and outstanding as of October 31, 2024 and July 31, 2024 | ||||||||
| Series B Preferred stock, $ par value; shares authorized; shares issued and outstanding as of October 31, 2024 and July 31, 2024 | ||||||||
| Undesignated preferred stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding as of October 31, 2024 and July 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
| 20 |
TIANCI INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Three Months Ended October 31,2024
(Unaudited)
PARENT COMPANY STATEMENT OF OPERATIONS
| For the three months ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| EXPENSE: | ||||||||
| General and administrative | $ | ( | ) | $ | ( | ) | ||
| OTHER INCOME | ||||||||
| Gain from investment in subsidiaries | ||||||||
| Other income net | ||||||||
| Total other income | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
PARENT COMPANY STATEMENT OF CASH FLOWS
| For the three months ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Share of (gain) from investment in subsidiaries | ( | ) | ( | ) | ||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expense and other assets | ||||||||
| Accounts payable and other accrued liabilities | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Operating proceeds from subsidiaries | ||||||||
| Deferred offering costs incurred | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning | ||||||||
| Cash and cash equivalents at ending | $ | $ | ||||||
NOTE 11 — SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company’s management has performed subsequent events procedures through the date these financial statements were issued and determined that there are no reportable subsequent events.
| 21 |
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview
On March 3, 2023, we acquired ownership of RQS United Group Limited, a company organized under the laws of the Republic of Seychelles (“RQS United”), pursuant to the Share Exchange Agreement dated March 3, 2023 among the Company, RQS United and RQS Capital Limited, the prior owner of RQS United.
RQS United is a holding company incorporated in the Republic of Seychelles. RQS United has no operations other than holding 90% of the outstanding share capital of its subsidiary, Roshing International Co., Limited, a company organized under the laws of Hong Kong (“Roshing”). Roshing was incorporated on June 22, 2011 and is primarily engaged in logistics solutions, including shipping operation management. We also generate a small portion of our revenue from our non-core businesses that we carry on through Roshing, including software development services, consulting services, and the sale of electronic parts.
Our primary line of business is global logistics. The Company, through its subsidiary, Roshing, provides global logistics services, encompassing booking and the transportation arrangement and related logistics solutions. Roshing’s customized logistics solutions are tailored to meet the diverse needs of its customers.
For the container shipping service, Roshing charters cargo space from shipping suppliers (such as shipowners, ship carrier or non-vessel operating common carriers) and then sub-charters that space to its customers (cargo owners or cargo agents). For the bulk goods shipping service, Roshing issues fixture notes to customers, and then arranges the booking of ships, and signs chartering contracts with suppliers (such as shipowners). Roshing also tailors the selection of transport options, and arranges to transport the goods from the port of loading to the port of destination, so as to complete the performance of the contract.
Roshing currently does not own or operate any transportation assets. By leveraging our senior management’s expertise in the global logistics industry and adopting an asset-light strategy at the early stage, Roshing has seen a significant growth in logistics revenue during year ended July 31, 2024. Shufang Gao, our Chief Executive Officer previously worked for a globally renowned shipping conglomerate, with over 20 years of management experience. His expertise spans shipping operation management, and logistics transportation. Leveraging this experience, he has provided the Company with the managerial framework to expand its global logistics business, as well as access to relevant customer and supplier resources in the shipping industry. Roshing’s business is primarily carried out in Hong Kong and other locations in the Asia-Pacific region, mainly in Japan, South Korea, Vietnam. Roshing’s logistics services also include the shipment of goods to African countries.
Roshing also generates revenue from the sale of electronic parts, and certain business and technical consulting services, independent from its global logistics business.
Key factors that affect operating results
Our performance of operations and financial conditions have been, and are expected to continue to be, affected by a number of factors which are set forth below.
Economic Conditions in Hong Kong. We are a Nevada company with operations conducted by our subsidiary Roshing, which is based in Hong Kong. Accordingly, if Hong Kong experiences any adverse economic, political or regulatory conditions due to events beyond our control, such as local economic downturn, natural disasters, contagious disease outbreaks, terrorist attacks, or if the government adopts regulations that place restrictions or burdens on us or on our industry in general, our business, financial condition, results of operations and prospects may be materially and adversely affected.
| 22 |
International Trade Environment. The demand for our shipping operation services is driven by the levels of international trade, which is in turn affected by global political, economic or social conditions. Any changes in a particular country’s trade policy could trigger retaliatory actions by affected countries, potentially eventually resulting in a trade war, which could increase the cost of goods and thus reduce customer demand for products if the parties have to pay tariffs which increase their prices or if trading partners limit their trade with the particular country. Our business is also susceptible to downturns and disruptions in the business activities of their direct customers that are beyond their control. If sales in a particular geographical market in which our direct customers target operate in decline, due to unstable regional and/or global political and economic conditions, such decline will likely lead to a corresponding plunge in the international trade volume which, in turn, could reduce the demand for freight forward and adversely affect our results of operations.
Our Ability to Source Cargo Space from Vendors on a Cost-Efficient Manner. A significant portion of our cost of revenue is the fee that we paid to our vendors. As a result, our results of operation depend on our ability to source vendors in a cost-efficient manner by obtaining a favorable price and effectively control the cost.
Results of Operations
For the three months ended October 31, 2024 and 2023
| For the three months ended October 31, | Change | Change | ||||||||||||||
| 2024 | 2023 | Amounts | Percentage | |||||||||||||
| Revenues | $ | 2,980,940 | $ | 1,326,648 | $ | 1,654,292 | 125% | |||||||||
| Cost of Revenues | 2,752,509 | 1,092,871 | 1,659,638 | 152% | ||||||||||||
| Gross profit | 228,431 | 233,777 | (5,346 | ) | (2% | ) | ||||||||||
| Selling and marketing | 85,188 | 102,071 | (16,883 | ) | (17% | ) | ||||||||||
| General and administrative | 260,393 | 118,705 | 141,688 | 119% | ||||||||||||
| (Loss) income from operations | (117,150 | ) | 13,001 | (130,151 | ) | (1,001% | ) | |||||||||
| Other income | 27,391 | – | 27,391 | 100% | ||||||||||||
| Provision for income taxes | 2,189 | 19,113 | (16,924 | ) | (89% | ) | ||||||||||
| Net (loss) | (91,948 | ) | (6,112 | ) | (85,836 | ) | 1,404% | |||||||||
| Less: net income attributable to non-controlling interest | 1,108 | 9,672 | (8,564 | ) | (89% | ) | ||||||||||
| Net (loss) attributable to Tianci | $ | (93,056 | ) | $ | (15,784 | ) | $ | (77,272 | ) | 490% | ||||||
Revenues
For the three months ended October 31, 2024, our total revenue increased to $2,980,940 from $1,326,648 for the three months ended October 31, 2023. The increase was mainly attributable to the continuing growth of our global logistics service and expansion of our client base. The global logistics service contributed 93% of our total revenue for the three months ended October 31, 2024.
| 23 |
The rest of our business lines represented 7% of our revenue in this quarter. We expect our operations other than global logistics to continue to contribute a relatively small portion of our revenue in the foreseeable future.
For the Three Months Ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| Global Logistics Service Revenue | $ | 2,759,693 | $ | 1,181,720 | ||||
| Product Sales Revenue | – | 59,902 | ||||||
| Other Service Revenues | 221,247 | 85,026 | ||||||
| Total | $ | 2,980,940 | $ | 1,326,648 | ||||
Cost of Revenues
Total cost of revenues increased from $1,092,871 to $2,752,509 for the three months ended October 31, 2024. The increase was in line with the growth of our global logistics services.
A breakdown of our cost of revenues is summarized as follows:
For the Three Months Ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| Cost of Global Logistics Service | $ | 2,590,865 | $ | 1,029,970 | ||||
| Cost of Products | – | 50,008 | ||||||
| Cost of Other Services | 161,644 | 12,893 | ||||||
| Total | $ | 2,752,509 | $ | 1,092,871 | ||||
Our cost of revenues from global logistics services represented 94% of total cost of revenues for the three months ended October 31, 2024. Cost of global logistics services primarily includes the cargo space charged by direct ocean carriers, fees charged by freight forwarders, fees charged for ancillary logistics services, and compensation we paid to our logistics employees.
| 24 |
Gross Profit
Our gross profits and gross margin of each business line are summarized as follows:
| For the Three Months Ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| Global Logistics Service | ||||||||
| Gross Profit | $ | 168,828 | $ | 151,750 | ||||
| Gross Profit Margin | 6.12% | 12.84% | ||||||
| Hardware Product Sales | ||||||||
| Gross Profit | $ | – | $ | 9,894 | ||||
| Gross Profit Margin | – | 16.52% | ||||||
| Other Services | ||||||||
| Gross Profit | $ | 59,603 | $ | 72,133 | ||||
| Gross Profit Margin | 26.94% | 84.84% | ||||||
| Total | ||||||||
| Gross Profit | $ | 228,431 | $ | 233,777 | ||||
| Gross Profit Margin | 7.66% | 17.62% | ||||||
Our total gross profit decreased by $5,346 to $228,431 for the three months ended October 31, 2024 compared to the three months ended October 31, 2023. The decrease in gross profit was primarily attributable to decreasing gross profit from hardware product sales and other services, partially offset by a slight increase in gross profit from global logistics services. For the three months ended October 31, 2024, our total gross profit margin was 7.66%, as compared to 17.62% for the three months ended October 31, 2023. Our gross margin from our dominant business line global logistics service dropped significantly to 6.12% for the three months ended October 31, 2024 from 12.84% for the three months ended October 31, 2023. The same trend applies to our other business lines as we adopted a competitive pricing strategy to build up our client base promptly in the short term. We anticipate that our gross margin realized from logistics services will fluctuate in the short-term as the result of our pricing strategy.
Operating Expenses
As our business grew, there was a significant increase in our total operating expenses, which were $345,581 for the three months ended October 31, 2024 as compared to $220,776 for the three months ended October 31, 2023. Our operating expenses primarily include payroll expenses, commissions, marketing, rent and professional fees relating to our obligations as a public company. The increase was mainly due to the increase in general and administrative expenses from $118,705 for the three months ended October 31, 2023 to $260,363 for the three months ended October 31, 2024, partially offset by a $16,883 decrease in selling and marketing expenses in the same period. The increase in general and administrative expenses was attributable to increasing payroll expenses necessitated by the expansion of our logistics operations, as well as expenses incurred in anticipation of a securities offering as we prepare the Company to list on Nasdaq. The decrease in selling expenses during this period is attributable to decreasing commission expenses that we paid to third-parties as we became less dependent on brokers for new businesses.
Income tax expense
Our income tax expense amounted to $2,189 for the three months ended October 31, 2024 as compared to $19,113 for the three months ended October 31, 2023. The change was due to the decrease in operating income generated by Roshing during this period.
| 25 |
Net income (loss)
As a result of the foregoing, we incurred a net loss of $91,948 for the three months ended October 31, 2024. As the Company owns only 90% shares of its operating subsidiary, Roshing, 10% of the net income realized by Roshing was attributed to the minority interest. Therefore, the net loss for the three months ended October 31, 2024 attributable to the shareholders of the Company was $93,056. In comparison, during the three months ended October 31, 2023, the Company incurred a net loss of $6,112.
Liquidity and Capital Resources
In assessing our liquidity, we monitor and analyze our cash on-hand and our operating expenditure commitments. Our liquidity needs are to meet our working capital requirements and operating expenses obligations. As of October 31, 2024, we had working capital of $696,406, as our cash amounted to $323,793, our current assets were $894,314 and our current liabilities were $197,908. To date, we have financed our operations primarily through capital contributions and advances from shareholders, as well as private investors. At October 31, 2024 we owed $2,271 to our related parties (See Note 4 to the financial statements).
We believe that our liquidity and working capital will be sufficient to sustain our business operation for the next twelve months. We may, however, need additional cash resources in the future if there are changes in business conditions or other developments or if the company finds and wishes to pursue opportunities for investment, acquisition, capital expenditure, or similar actions.
We started providing logistics services during the quarter ended October 31, 2023. Although the business grew rapidly during the fiscal year ended July 31, 2024, we may require significant capital expenditure in order to obtain additional market share. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity may result in dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. Our obligation to bear credit risk for certain financing transactions we facilitate may also strain our operating cash flow. We cannot assure you that financing will be in place or on terms acceptable to us, if at all.
The following table summarizes the key components of our cash flows for the three months ended October 31, 2024 and 2023.
| For the Three Months ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by (used in) operating activities | $ | (15,211 | ) | $ | 124,491 | |||
| Net cash used in investing activities | – | – | ||||||
| Net cash provided by (used in) financing activities | (74,125 | ) | – | |||||
| Net change in cash and restricted cash | $ | (89,336 | ) | $ | 124,491 | |||
Operating activities
Net cash of $15,211 used in operating activities for the three months ended October 31, 2024 was primarily the result of net loss of $91,948, which was only partially offset by a $73,768 increase in accrued liabilities and other payables.
Net cash of $124,524 provided by operating activities for the three months ended October 31, 2023 was primarily the result of an increase in accounts payable of $195,232 and an increase in accrued liabilities and other payables of $140,354 which was partially offset by the increase of $ 195,629 in accounts receivable.
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Investing activities
The company had no investing activities during the three months ended October 31, 2024 and 2023.
Financing activities
Net cash used in financing activities for the three months ended October 31, 2024 was $74,125 which was attributable to the payment of fees incurred in anticipation of a public offering of the Company’s securities.
Critical Accounting Estimates
Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
In connection with the preparation of our financial statements for the three months ended October 31, 2024, there was one accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results. This was the accrual as “deferred offering costs” of amounts we have paid to professionals and others for services rendered and to be rendered in connection with a public offering of the Company’s securities. We will realize the value of these assets (and offset them against proceeds of the offering) only if the offering is placed successfully. We have accrued the payments as assets because we anticipate a successful offering. If, however, the offering fails to close, we will be required to amortize the asset as an expense.
Recently Issued Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. The Company does not believe that any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets,
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
| ITEM 4 | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures.
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of October 31, 2024. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms as a result of the following material weaknesses:
| · | There is an inadequate segregation of duties consistent with control objectives. Our Company’s management is limited in number, resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible. | |
| · | There is a lack of formal policies and procedures necessary to adequately review significant accounting transactions. The Company utilizes a third-party independent contractor for the preparation of its financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third-party independent contractor is not involved in the day to day operations of the Company and may not be provided information from management on a timely basis to allow for adequate reporting/consideration of certain transactions. |
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended October 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
| Item 1. | Legal Proceedings |
| None. | |
| Item 1A | Risk Factors |
| There have been no material changes in our risk factors from those previously disclosed in our annual report on Form 10-K for the year ended July 31, 2024. | |
| Item 2 | Unregistered Sale of Securities and Use of Proceeds |
| (a) Unregistered sales of equity securities | |
| There were no unregistered sales of equity securities by the Company during the first quarter of fiscal year 2025, other than those reported in Current Reports on Form 8-K. | |
| (c) Purchases of equity securities | |
| The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the first quarter of fiscal year 2025. | |
| Item 3. | Defaults Upon Senior Securities. |
| None. | |
| Item 4. | Mine Safety Disclosures. |
| Not Applicable. | |
| Item 5. | Other Information. |
|
Trading Arrangements. During the quarter ended October 31, 2024,
no director or officer | |
| Item 6. | Exhibits |
| 31-a(1) | Rule 13a-14(a) Certification of CEO and CFO | |
| 32-a(1) | Rule 13a-14(b) Certification of CEO and CFO | |
| 101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH | Inline XBRL Schema | |
| 101.CAL | Inline XBRL Calculation | |
| 101.DEF | Inline XBRL Definition | |
| 101.LAB | Inline XBRL Label | |
| 101.PRE | Inline XBRL Presentation | |
| 104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| TIANCI INTERNATIONAL, INC. | |
| Date: December 6, 2024 | By: /s/ Shufang Gao Shufang Gao, Chief Executive, Financial and Accounting Officer |
* * * * *
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